Under deposit accounting for the ceding company, what happens to the amount paid?

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Multiple Choice

Under deposit accounting for the ceding company, what happens to the amount paid?

Under deposit accounting, the amount paid to the reinsurer is not treated as premium. Instead, it is recorded as a deposit asset with the reinsurer. This money is held as security and remains on the ceding company’s balance sheet as a temporary asset until the contract is settled or the deposit is returned/offset against future settlements. It does not immediately impact earned premium or reduce liabilities.

Under deposit accounting, the amount paid to the reinsurer is not treated as premium. Instead, it is recorded as a deposit asset with the reinsurer. This money is held as security and remains on the ceding company’s balance sheet as a temporary asset until the contract is settled or the deposit is returned/offset against future settlements. It does not immediately impact earned premium or reduce liabilities.

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